BLOGGER COMMENT: The biggest problem facing commercial real estate is the capital markets’ lack of liquidity. CMBS issuance went from $230 billion in 2007 to $12 billion in 2008 to less than a billion dollars YTD in 2009 (my source materials are labeled “CMSA-Compendium” and are available to view or download from the box.net widget).
… and not just in New Issue – outside of the demand created by TALF, there is no liquidity in secondary CMBS either (volumes have dropped from the billions to the millions over the last two years). If you’re willing to sock away the money for a few years, and do your homework on the credit (i.e. are the underlying properties capable of withstanding the current crisis), there is a tremendous opportunity to buy CMBS. AND because of liquidity (there is not enough money chasing CMBS, but a lot of funds are chasing whole loans) CMBS are still priced substantially cheaper than even non-performing whole loans.